Is it rude to make a profit from your friends?
By @edent
· business introspection · 18 comments · 550 words · read ~174 times.
You're in a restaurant with a group of friends. The waiter won't let you split the bill, so you offer to pay for it on your card and have your friends send you their share. How much would you charge them for that service?
That sounds absurd, right? OK, you might agree to split the bill evenly and maybe come out one drink in profit - but it's still a bit of a social faux pas to deliberately make money off your mates.
Recently, I was asked if I'd like to run a market stall at a geek event. There would be a bunch of traders there, and I could have a little pitch where I could sell the various gadgets, trinkets, and bits of art I've made over the years.
But the whole thing weirded me out and I'm trying to understand why.
Everything I could make and sell would involve me buying stuff at wholesale price and selling retail price. Like, I get that's the way commerce works, but it also feels kind of… I don't know how to explain. Rude?
If I buy 100 things at £10ea, assume I only sell 75% of them, plus VAT, plus credit card charges, then I have to sell for £16.50ea just to break even.
That doesn't account for my time spent buying them. Nor does it include dealing with returns, breakages, or any other expenses. I also need to pay corporation tax on my profits.
Speaking of which, that £16.50 above doesn't include any profit! If I wanted to make the enterprise worthwhile, I'd probably need to charge at least double the wholesale cost - which would probably reduce the number of people buying.
Last time I did anything like this, I used pre-orders to reduce my risk and reduce the cost - but I'm not sure how many people would pre-order something to pick up several weeks later at an event.
I've loved all the weird things I've purchased at hackspaces and conferences. And certainly I don't feel ripped off by the merchants. I can't wait to buy my friends' art, books, and gadgets. But it feels weird when it is me doing it.
I guess one issue is that this isn't my main source of income. I'm gainfully employed - so any extra income from selling stuff would really be in the category of fun money. Don't get me wrong, more money is always useful, but this would be a lot of effort for a relatively small amount of money, all of which I don't really need.
Also, and I realise this is my problem, I don't see my time and expertise as valuable in that way. I'd much rather show you how to build a thing, or blog the instructions, or help you understand how something works.
Finally, I think I feel this way because I see all the people I meet as friends. If we're at a weird hacker event, there's a good chance we have something in common and I'd be delighted to share a pint with you.
Does anyone else feel this way? Do you happily make fat stacks of cash from your peers? Am I just weird and neurotic? Let me know in the comment box. It's free.
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Come buy things from me at EMF 😛
Seems a totally normal reaction to me. I would hate to have to do what you described. I'd much rather help an organization without having to deal with the public. That is just my personality. Some people loving doing what you describe, others, like me, hate it. but I have always found ways I could contribute to the benefit of an organzation.
The problem is the overlapping boundary between a customer and a friend. Once you make money off a friend, they can become more of a customer than a friend......for me that blur in the boundary would be unwelcome. It can also work the other way too. I have known people who make food for a living and some of their "friends" take advantage and expect free grub from them all the time. That is insanely rude too. If it is offered, then that is an entirely different matter. As the saying almost goes; with friends like these who needs customers?
You really need to talk to women who run craft-related businesses about the difficulty of charging high enough prices to make a living whilst hobbyists undercut then because charging more feels icky. There's an awful lot of privilege in your position there that you need to recognise and tackle.
@Edent the flipside to that is if you don't charge a profitable rate you maybe undercutting people who do need to make money from selling stuff. Who may also be your mates.
This is one reason I'm loathe to set up a Patreon for Dirty Feed. It feels like asking friends - some of which already help the site - to do more. I also think that's probably more my problem than a real one, though.
(The other reason is legal worries about fair use.)
@Edent Judging by the number of my friends who try to get me to buy their Multi-Level Marketing products (e.g. Body Shop at Home, Forever Living) it seems to me that lots of people have no issue with this.
The main bit of advice I give to people in my industry who are struggling with under-charging (or charging at all) is: Think Top Down. You have to think about the price you charge to the customer, and whether that represents good value to them. And that's ALL that matters. So many small business and creators are unsure how to think about pricing, so they read these ghastly articles which tell you to calculate 'your cost of business' or whatever, and then put a flimsy margin on top of that. Repeat after me: "this type of cost+ thinking is disastrous". Think customer value, not retailer costs. (Of course you should do a sense check that you're not going to go broke with your business model, of course you should. But that's not how price points should be set.) Do your research. If a tenner feels like the right price for some merch, and your soundings of potential customers confirm that, then it doesn't matter a HOOT if you bought it for £2. Well done you. You'll even find some settings where the price/demand curve inverts and people are actually happier the more they pay. Well done, you became a luxury/Veblen vendor. Harsh capitalism at work, maybe, but 15 years as a creator has taught me some things.
@Edent been thinking a lot about this while trying to put together kits for a workshop at EMFcamp, particularly the question of what % of the kits will sell and how to set the price accordingly. You could either make a huge loss or profit and can’t really predict which.
Running a small e-commerce business is just as bad - yes, I can buy stock at say £10 per item in bulk (factoring in shipping charges from manufacturer) - but then once I add on outward postage (about £5), corporation tax (19%), VAT (20%), card processing fees (Stripe: 20p+1.5%) - that's £21.95* even ignoring any platform fees (Shopify, web hosting costs etc), storage, labour, packaging materials, losses (damaged goods, stuff just sat there for years, postage losses, international orders which are returned as the person missed their apartment number and so you refunded the order+lost the postage cost....), photography costs, insurance, accountancy fees....
*£21.95 is approximate as you'll have to pay the VAT/corporation tax on the total amount charged but have to take it all into account when working out the amount to pass to the card processor who then adds their fees... It can get confusing and makes me wonder why I bother
All too relatable. I grew up with the mentality that you should always pay what something is worth, especially when it comes from friends, but don't charge others for your own labor. It is a toxic kind of double standard that leaves you in a worse position than you otherwise would be at no benefit to your friends. I struggle with this a lot myself, it is even hard to ask for a raise at work and it took me forever to start promoting my ko-fi on my website (there is a link to it somewhere I think) because it feels wrong to talk about money unless I'm the one giving it.
Don't let it eat at you and only give what you reasonably can of youreself.
@Edent IMO there are 2 ways to think about it to make it more palatable:
Give a predetermined %age of the "profit" to a cause that means something to you
Either one allows you to charge a markup and therefore not undercut someone who does rely on profitable prices for an income, whilst continuing to enjoy what you're doing
It is easy to worry about this but also possible to break it down rationally.
If you are trying to as ethical as you can, you could consider banking as an ethical career. If you are able, do a task at which you are adept, earn big and spend philanthropically. I imagine Bill Gates, for example, to have achieved more for humanity in this way than if he had eschewed the tech business for a career as a hands-on aid worker. If you think you may be doing something which does not extract best value from the time and expertise you can offer, maybe it is more ethical to choose a more productive activity?
If you do choose to sell stuff, rather than pricing artificially to make yourself feel better, it may be more ethical to profit within the market structure, and then donate if you can. People will only buy at prices they are willing to pay. If you deliberately underprice, you are effectively pushing other marketplace participants to join you in donating money they may not have to customers who probably need it less than a cause you would choose.
@Edent I have a similar feeling, but I'm not sure it's only "friendship". I also struggle to imagine how would I price my labor as a freelance. Curiously I have fewer issues with full time employment. I don't love to ask for raises but I have, even to bosses that are friends.
In other news, I am not surprised your post fared well on Threads but I'm a bit shocked at the vitriol of some replies. I take it those are drive by comments? Who would follow you and behave like that?
@Edent FWIW, I would happily have a pint and a good conversation with a large chunk of my dayjob customers. Doesn't mean they don't get billed 🙂
I'll charge friends one of two rates: pro bono publico or full commercial rate. "Mates rates" are an extra 10% - although in practice I've never actually charged a friend, they can't afford my rates.
But I'll not let them pay a pittance for my time and go away thinking that was a fair transaction.
Same goes for retail - if someone wants to pay wholesale rates then they're free to go to the same source you went to :). Or if you think you're performing a public service then sell at cost. But if you're adding any mark-up then - as others have said - price things properly.
@Edent I’ve been toying with the idea of selling some t-shirts that I’ve designed based on out of copyright book stuff. I have set up a small shop page and linked it to an on demand printing service thing. Just can’t bring myself to put it live as I’m not sure I want to deal with the tax implications etc! (Not to mention GDPR, T&Cs etc) Ideally I’d not make any money from it and donate all the proceeds to a club that I’m a member of but I guess I’d still need to pay tax first.
You’re offering something for sale. If anyone (friend, foe or indifferent) wants to make a purchase, they do so of their free will, they’re not obligated. They will decide if the product is something they want to buy at whatever price you choose to set. Ergo, set the price with due consideration to the potential customers’ perception of value and not the cost.
I wonder if what this is really about though, is some concern as to what your friends will think about your pricing strategy. I’m pretty confident they’ll give it less thought than you… for the potential customers it’s just “do i want this object for £XX” rather than “who does that @edent chap think he is, charging £XX for this “. They might not be able to afford it, but that doesn’t diminish its value (there are many things I would like but can’t afford… some of them are overpriced for sure, but all of them are beyond my budget).
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